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I am pretty impressed that Hoadley that does not really provide anything special (or useful) is so popular - it must be the pricing.

The previous "release" was before Dodd-Frank - the expectation is that most volume will not come from retail pikers, but will be from institutional clients getting cleared through the exchange (to reduce the C/P risk, margin netting etc etc). Variance swaps are very popular products in the OTC...

Your P&L for the day would be the change between the two settlement values times the number of variance units times the point value (I think each unit is worth a dollar). A one day change in futures settlement value is driven by primarily change in the implied portion plus a tiny change in the...

I am involved with these in the OTC markets a fair amount but I really would love for these to be liquid in the listed space. Hopefully, as people get educated, they will pick it up. Yeah, on a day like today, especially in short-dated variance, you are not going to find liquidity in OTC...

They are drastically different animals, variance swap is realized minus implied, the other is simply changes in implied volatility. Also, VIX futures are forward volatility, while these are spot-starting variance swaps (so, March 13 includes realized variance from now to Mar 13, while Mar13 VIX...

I reached out to a former colleague and he said they'd cross with me on the exchange, if I quote in sufficient size (at least 100k vega notional, I'd guess). On the other hand, he felt that it would be unlikely that serious liquidity develops there unless retail/non-funds traders will get...

Right. High potential payout with low probability, also known as far OTM option. If you treat it as such (i.e. your investment is of the size that you are willing to kiss good bye), all good. This said, I think there are plenty awesome start-ups out there with much better chances for success.

He looks eerily familiar, I could swear he used to work for Deutsche Bank or something along these lines. Anyway, I could not figure out from the presentation what exactly is the target customer base (which is a key question - they are launching costly hardware and hoping to rent it out, but...

Aside from the coolness factor, this is mostly noise with little signal. Did you ask yourself: -- Is this a disruptive or constructive business (does it steal business or does it create new one)? -- What is the actual product they provide - the satellite hardware, the control center services...

You want variance strike to be higher if the business day year fraction is lower then the calendar day year fraction. So, you want to divide variance by the business day year fraction and multiply by the calendar day year fraction: x = [BD/ 252] / [CD/ 365] = [BD * 365] / [CD * 252] var = vix...

A fair amount but all in OTC - we have not tried the variance swap futures yet. The % varies with the opportunities, obviously, I'd say from 5% to 25%. EDIT: Sorry, misread you - you are asking about gamma swaps. You know, through my entire life as a vol trader, I was asked to price gamma...

8 vols? No, more like 85 vols - 1k of vega notional and losing 85 thousand. Worst draw down is a 110 vols or something around that, also in 08, which is worth 5 or so years of accrued P&L. Filtering trades based on prior realized variance vs current implied (the right panel) improves the...

I honestly don't remember, it's in the vega notional field though - I think it's 1k vega notional every month.

Does anyone have any question on the simple strategy sheet? I was going to go on to talk about convexity and some other features of variance, but do not want to start unless every is on board (whoever wants to be on board).

I assume they are doing it consistent with the OTC variance products and market disruption event is the day when S&P fails to publish (e.g. when trading was stopped for more then 20% of S&P 500 companies by weight). Those days are excluded. Not really a concern, unless you expect september 11-...

You are all welcome. I will try to continue tomorrow - I am stuck at home with a flu and need something to occupy my head.

Ok, here we go. Apparently, the file was too big, so now it is compressed.

How do I attach an XLS file here? Wanted to post the sample strategy, but for some reason it is not appearing!

I will take a theoretical numerical example, but something close to reality: Lets assume that -- you hit the Jan 13 futures today for 16.75 in 100k vega -- since Aug 20th, S&P500 volatility has been about 0.65% per day If you do the legwork, you will see that -- N = 106 -- n = 70...

First of all, thank you all for participating. Also, if you see any errors, please let me know right away (thank you, tj!). Obviously, I try to be as correct as I can, but I am in bed with fever and my attention span is rather low. Anyway, I promised that I'd post a simple short variance...